We introduce a measure of diversification for portfolios comprising d risky assets. This measure relates the smallest possible return variance among these d assets to the overall portfolio return variance, yielding the portion of non-diversifiable risk. In the context of normally distributed...

We show theoretically that lower tail dependence (chi), a measure of the probability that a portfolio will suffer large losses given that the market does, contains important information for risk-averse investors. We then estimate chi for a sample of DJIA stocks and show that it differs...

This paper addresses the open debate about the effectiveness and practical relevance of high-frequency (HF) data in portfolio allocation. Our results demonstrate that when used with proper econometric models, HF data offers gains over daily data and more importantly these gains are maintained...

We propose a fund allocation strategy for a highly risk-averse investor based on pessimistic decision making to construct portfolios of four major asset classes. Using US data (indexes of stocks, bonds, real estate, and commodities) from January 1990 to December 2010, we find that the proposed...

This paper addresses the open debate about the usefulness of high-frequency (HF) data in large-scale portfolio allocation. We consider the problem of constructing global minimum variance portfolios based on the constituents of the S&P 500 over a four-year period covering the 2008 financial...

Ever since Harry Markowitz published his seminal paper on portfolio selection, investors have incorporated estimates of future volatilities and correlations into their asset allocation process. While portfolio construction methods continue to evolve, many investors continue to forecast...

Good market timing skills can be an important factor contributing to hedge funds' out-performance. In this paper we use a unique semi-parametric panel data model capable of providing consistent short period estimates of the return correlations with three market factors for a sample of Long/Short...

We develop portfolio optimization problems to a non-life insurance company for finding the minimum capital required, which simultaneously satisfy solvency and portfolio performance constraints. Motivated by standard insurance regulations, we consider solvency capital requirements based on three...

We consider a capital at risk (CaR) minimization problem in an incomplete market Black-Scholes setting. The optimization problem is studied, given the possibility that a correlation constraint between the wealth process and a financial index is imposed. The optimal portfolio is not unique and it...